Global coffee trade struggles as prices skyrocket
A worker holds a handful of freshly roasted coffee beans at a roasting facility. (Adobe Stock Photo)
Soaring coffee prices are triggering a major crisis, forcing traders and roasters to cut back on purchases while retailers struggle to place new orders amid rising costs, U.K.-based Reuters reported.
According to Reuters, at the annual convention of the U.S. National Coffee Association in Houston this week, experts highlighted that Arabica coffee futures on the Intercontinental Exchange (ICE)—widely used as a global benchmark—have surged by 70% since November, triggering significant turmoil in the industry.
Renan Chueiri, general manager of Ecuador-based coffee company ELCAFE C.A., stated that for the first time this year, the company had failed to sell its entire annual production by March. “We would usually be sold out by now, but so far we sold less than 30% of production,” Chueiri said.
Declining crop yields in major coffee-producing countries such as Brazil have further restricted the availability of coffee beans. A coffee broker noted that “hand-to-hand” trading has become increasingly common as companies avoid stockpiling.
“Nobody wants to be exposed; nobody is buying for future delivery,” the broker said.
A wave of bankruptcies could be on horizon
A senior executive at a major U.S. coffee roasting facility indicated that rising prices have imposed severe financial pressure on both businesses and consumers, with some clients reportedly struggling to sustain their operations and approaching bankruptcy.
Supermarkets and retailers’ reluctance to absorb rising costs has disrupted supply chains, leading to shortages in some stores.
Meanwhile, coffee stockpiles at warehouses near U.S. ports have dropped by half, with some storage companies terminating lease agreements early and shutting down facilities.
Michael Von Luehrte, owner of the brokerage firm MVL Coffee, predicted that the industry may experience consolidation, with financially stronger companies expanding their market share while weaker firms could be forced out.
Additionally, commodities trader Louis Dreyfus noted that coffee plantations are expanding in response to the price surge, with new planting areas in India, Uganda, Ethiopia, and Brazil, potentially leading to an oversupply that might eventually cause a sharp price decline.
However, until prices return to more sustainable levels, much of the coffee industry is expected to face significant financial difficulties, sector representatives cautioned.
